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C.A.No.2508/08     

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.2508 OF 2008

M/s. Modern Hotel        …..Appellant

Versus

Commissioner of Excise & Ors.     …..Respondents

J U D G M E N T

SHIVA KIRTI SINGH, J.

1. The appellant  is  a  partnership  firm and is  aggrieved  by

dismissal of its Writ Appeal No.1055 of 2002 by an order dated

09th January 2008 wherein the Division Bench has chosen to

place complete reliance on an earlier Division Bench judgment

dated  24th June  2005  in  W.A.No.1151  of  2005  (M/s.  Hotel

Highway & Anr. v. N.K. Subhin & Ors.).

2. The  issue  falling  for  consideration  is  mainly  one  of  law

relating to scope and interpretation of a proviso to Rule 13A(5) of

the Foreign Liquor Rules as in force at the relevant time in the

State of Kerala.  Subsequently it appears that Rule 13A, dealing

with grant of different kinds of excise licence, along with proviso

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has been renumbered as Rule 13B w.e.f. 1.4.2003.  The relevant

proviso needs to be noticed :

“Provided  further  that  no  defaulter  of  abkari arrears due to the Government shall be permitted to renew the licence unless he produces from the Excise Department  a  certificate  to  the  effect  that  he  has cleared 50% of the abkari arrears pending at the time of renewal of the licence.”

3. The facts of the case need not detain us for long except

noting that the appellant firm was having a FL-3 licence to run a

bar  attached  to  a  hotel  at  Kundara  in  Kollam District.   The

partnership firm was re-constituted on 01.10.1995 and one Shri

J.  Sasikumar  was  admitted  as  one  of  the  partners.   On

11.05.2001 the request of the appellant firm for renewal of its

FL-3 licence was rejected by the Excise Commissioner on the

ground that one of the partners had conducted abkari business

in the year 1981-1982 and had incurred dues to the Government

of Rs. 70 Lacs which had further grown on account of interest

and  until  50%  of  the  abkari  arrears  pending  at  the  time  of

renewal of the licence was cleared, the licence of the appellant

could not be renewed.  Appellant preferred writ petition in the

High Court of Kerala wherein by an interim order the respondent

authorities  were  directed  to  grant  renewal  for  the  year

2001-2002 on the condition of payment of Rs.20 Lacs towards

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C.A.No.2508/08     

the arrears in addition to the licence fee.  On such payment the

licence was renewed for that year.  But the writ petition came to

be dismissed on 02.04.2002 on a finding that a partnership firm

could not claim a separate juristic identity as it is only a totality

of every partner and so long one or more partner suffers from

liability or disqualification, the licence could not be renewed till

the statutory requirement of the relevant rule was satisfied.  The

appellant filed appeal bearing W.A.No.1055 of 2002 before the

Division  Bench.   By  an  interim  order  dated  15.04.2002

appellant’s  licence  was  ordered  to  be  renewed  for  the  year

2002-2003 on similar condition requiring payment of additional

amount  of  Rs.20  Lacs  over  and  above  the  licence  fee.   On

compliance, the licence was renewed accordingly.  On account of

another interim order dated 13.05.2003 appellant’s licence was

renewed for the year 2003-2004 also on its paying Rs.10 Lacs in

addition to the licence fee.  The appellant’s licence got further

renewal upto the year 2007-2008 only on the strength of earlier

additional deposits of Rs.50 Lacs in total.  The writ appeal itself

was heard on merits and dismissed by the impugned judgment

dated  09.01.2008  following  earlier  Division  Bench  judgment

dated 24.06.2005.

4. On  behalf  of  appellant  our  attention  was  drawn  to  a

subsequent development mentioned in I.A.No.1 of 2009 filed in

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this appeal.  Paragraphs 9, 10 and 11 of the I.A. disclose that the

Government of Kerala declared an Amnesty Scheme (One Time

Settlement  Scheme)  on  26.05.2008  wherein,  if  the  other

conditions were satisfied, a lump sum payment of 75% of the

principal  dues  could  be  sufficient  to  waive  the  remaining

principal  as  well  as  all  the  penalty  and  interest.   Taking

advantage  of  that  scheme  the  defaulting  partner  Mr.  J.

Sasikumar along with his partners of the other partnership paid

75% of the principal amount, i.e., Rs.53,09,440/- and as a result

the Excise Department on 10.11.2008 issued a certificate that

no amount was now outstanding from said Mr. Sasikumar.  The

certificate  is  an  enclosure  to  the  I.A.  and  discloses  that  on

payment  of  earlier  noted  amount  the  defaulters  including  J.

Sasikumar got amnesty from paying not only the remaining 25%

of  the  principal  amount  but  also  from  liability  to  pay

Rs.2,73,47,650/-  towards  interest  upto  31.05.2008.   On  the

strength of such payment and subsequent development, in the

I.A.  the  appellant  sought  an  order  from  this  Court  for

unconditional  return  of  Rs.50  Lacs  in  total  deposited  by  the

appellant for getting several renewal of its licence as per interim

orders of the High Court.

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5. This Court on 18.01.2010 heard the parties in respect of

I.A.No.1 and passed the following order ;

“We have heard learned counsel for the parties in the I.A.  We direct that, as an interim measure, the amount of Rs.50,00,000/-, which is claimed by the appellants by way of this I.A., be refunded to them subject  to  the  outcome  of  the  result  of  the  main appeal, on furnishing of security to the satisfaction of the Commissioner of Excise.”

6. In terms of that order the appellant has obtained refund of

Rs.50 Lacs from the concerned authority but on furnishing of

required  security  to  the  satisfaction  of  the  Commissioner  of

Excise.

7. When this appeal was taken up for hearing learned counsel

for the appellant initially took the stand that due to passage of

time and other reasons the appellant was not keen to press the

appeal provided the appellant was absolved of its liability created

by furnishing of  security  for  Rs.50 Lacs.   In  other  words,  he

wanted this Court to order for discharge of security furnished by

him to the Commissioner of Excise.  This prayer of the appellant

was strongly contested by Ms. Bina Madhavan, learned counsel

appearing  for  the  respondents  by  placing  reliance  upon

averments  made  in  the  counter  affidavit  (additional)  filed  in

response to I.A. No.1 of 2009.  In paragraph 6 of the counter

affidavit  the respondents  have relied upon relevant proviso to

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Rule  13A(5)  of  the  Foreign  Liquor  Rules  and  have  taken  the

stand that the liability or disqualification of each of the partner

in the defaulting firm shall  be distributed but if  such liability

continues then for the purpose of the proviso the liability of one

of  the partners  will  be  liability  of  the firm for the purpose of

abkari  arrears disentitling renewal  as provided in the proviso.

According to respondents the High Court has correctly decided

the law that a partnership firm is a totality of every partner and

that  the  default  of  one  of  the  partners  can  be  taken  into

consideration for treating the firm as a defaulter even if only one

of its partners continues to be in arrears of abkari dues.

8. So  far  as  deposit  of  Rs.50  Lacs  made  by  the  appellant

towards abkari  dues as per interim orders is  concerned,  it  is

respondents’ clear stand that as per Rule 6(25) of Abkari Shops

(Disposal in Auction) Rules, 1974 the whole of Rs.50 Lacs had to

be and was appropriated towards interest existing at the time

the remittance was made and only the remaining dues of interest

along  with  permissible  25%  of  the  principal  amount  was

subsequently written off as per Amnesty Scheme of 2008.  The

claim  of  the  appellant  that  the  amount  of  Rs.50  Lacs  was

required to be or had been kept in a suspense account has been

strongly refuted as false with a positive statement that the said

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amount was appropriated towards interest in accordance with

the relevant rules.

9. Having  heard  the  parties  and  applied  our  mind  to  the

relevant facts and the rules we find ourselves in agreement with

the submission on behalf of the respondents that appellant is

not  entitled  to  receive  refund  of  Rs.50  Lacs  on  account  of

subsequent  deposit  of  required  percentage  of  principal  dues

under the Amnesty Scheme of  2008.   The amnesty earned in

2008 must be confined to the arrears of interest outstanding at

the relevant time in 2008 and by that date the earlier deposits of

Rs.50 Lacs had already been appropriated towards interest.  No

fault can be found in appropriating that amount because there is

no  dispute  regarding  the  actual  outstanding  amounts  of

principal  and  interest  which  clearly  find  mention  in  the

certificate dated 10.11.2008 (Annexure P-6) to I.A. No.1 on which

appellant itself has placed reliance.

10. We are also of the considered view that since there was no

challenge  to  the proviso to  Rule  13A(5)  of  the Foreign Liquor

Rules,  the  respondents  were  well  within  their  legal  rights  to

insist that at least 50% of the excise dues against the partners of

the appellant  was required to be paid in accordance with the

proviso, to get the desired renewal.  Such decision of the High

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Court in our considered view does not require any interference.

Section 5 of the Indian Partnership Act, 1932 (the Act) provides

unequivocally  that  the  relation  of  partnership  arises  from

contract  and not  from status.   Such contracts  clearly  cannot

override provisions in a statute or statutory rules.  Section 49 of

the Act stipulates for payment of firm debts and also of separate

debts of any partner by use of firm’s property and if there is no

surplus then separate property shall be applied for payment of a

partner’s separate debts.  Other than the defaulting partner can

always claim their loss, if any, from the latter.

11. We have taken the aforesaid view for an additional reason

that  the  factum of  excise  dues  of  one  of  the  partners  of  the

appellant  and  its  subsequent  payment  under  the  Amnesty

Scheme is not in dispute or controversy.  This is apparent from

the  certificate  dated  10.11.2008.   Though  large  part  of  the

interest amounting to several crores could not be recovered but

that was on account of grace shown by the Government itself by

formulating  the  Amnesty  Scheme  of  2008.   In  such

circumstances exercise of writ jurisdiction to help the defaulter

would be inappropriate. It would be unjust to direct for refund of

Rs.50 Lacs on the premise that its recovery in the manner made

is being questioned by the appellant.  

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12. For the aforesaid reasons we find no merit in this appeal

and it is dismissed accordingly.  It is clarified that appellant is

now required to redeposit Rs.50 Lacs to meet its liability under

the security furnished as per interim order of this Court dated

18.1.2010.  It is directed to do so within six weeks along with

interest at the rate of 6% per annum from the date of receipt of

that amount till its redeposit. There shall be no order as to costs.

     …………………………………….J.       [VIKRAMAJIT SEN]

             ……………………………………..J.                         [SHIVA KIRTI SINGH]

New Delhi. August 19, 2015.

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